Brands Academy Pvt Ltd vs Rishu Monga

1

NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI COMPANY APPEAL(AT) NO.371 OF 2017 (Arising out of order dated 13.09.2017 passed by the National Company Law Tribunal, New Delhi Bench at New Delhi in CP No.5(ND)/2015).

IN THE MATTER OF: Before NCLT Before NCLAT

1. Brands Academy Pvt Ltd 1st Respondent Appellant Regd Office: D-142A, 2nd floor, Patel Garden, Dwarka Main road, Near Royal Banquet, New Delhi-110059

2. Mr. Sanjay Kumar (Director), 2nd Respondent Appellant R/o 262, DDA Flats (Expandable), Pocket-10, Nasirpur, New Delhi-110045

Vs

1. Rishu Monga (Ex-Director) Petitioner 1st Respondent R/o C-3018, Gaur Green City, Indira Puram, Ghaziabad-201010 Uttar Pradesh.

2. Mr. Ajay Kumar (Ex Director), 3rd Respondent 2nd Respondent R/o 91, Hans Nagar, Pandwala Kalan, Najafgarh, New delhi-110019.

3. Registrar of Companies (ROC), 4th floor, IFCI tower, 61, Nehru Place, New Delhi-110019

4. Regional Director (RD), A-14, Sector-I, PDIL, Bhawan, Noida Uttar Pradesh Respondents

Present: For Appellant:-Mr Bijender Singh and Mr. Surendra, Advocates.

For Respondents: - Mr. Mukul Talwar, Senior Advocate with Mr. Aman Bhalla, Advocate.

Company appeal (AT) No.371 and 417 of 2017 2

And COMPANY APPEAL (AT) NO.417 OF 2017

In the matter of:

Rishu Monga, Before NCLT Before NCLAT R/o C-3018, Gaur Green City, Indira Puram, Ghaziabad-201010 Uttar Pradesh. Petitioner Appellant

Vs

1. Brands Academy Pvt Ltd 1st Respondent 1st Respondent Regd Office: D-142A, 2nd floor, Patel Garden, Dwarka Main road, Near Royal Banquet, New Delhi-110059

2. Mr. Sanjay Kumar (Director), 2nd Respondent 2nd Respondent R/o 262, DDA Flats (Expandable), Pocket-10, Nasirpur, New Delhi-110045

3. Mr. Ajay Kumar, R/o 91, Hans Nagar, Pandwala Kalan, Najafgarh, New delhi-110019.

4. Registrar of Companies (ROC), 4th floor, IFCI tower, 61, Nehru Place, New Delhi-110019

5. Regional Director (RD), A-14, Sector-I, PDIL Bhawan, Noida Uttar Pradesh Respondents

Present: For Appellant:-Mr Mukul Talwar, Sr. Advocate with Mr. Aman Bhalla, Advocate for Appellant.

For Respondents: - Mr Bijender Singh and Mr. Surendra, Advocates.

Company appeal (AT) No.371 and 417 of 2017 3

JUDGEMENT

BALVINDER SINGH, MEMBER (TECHNICAL)

1. These two appeals have been preferred by appellants under Section 421

of the Companies Act, 2013 against the impugned order dated

13.09.2017 passed by the Hon'ble National Company Law Tribunal,

New Delhi Bench at New Delhi in C.P. No.5(ND)/2015. In appeal

No.371/2017 the appellants have sought the relief of setting aside the

impugned order dated 13.09.2017 and in appeal No.417/2017 the

appellant has sought the relief of setting aside the finding pertaining to

the appellant indulging in parallel business as well as the findings

pertaining to the siphoning of funds not being proved against the

respondents. The relevant portion of the impugned order dated

13.09.2017 is as under:

"14. As the edifice of all decisions is based on the

foundation of the alleged meeting dated 11th December,

2014, which as observed earlier cannot be held valid, the

balance tilts therefore in favour of the Petitioner.

This Bench therefore holds and directs as follows:

"(1) Appointment of Respondent No.3 as Additional Director

is null and void, a decision having been taken without a

proper Quorum. His appointment is, therefore, set aside.

Consequently, all major decisions taken by the Board of

Respondents No.2 and 3 are a nullity which include removal

of the petitioner as a Director and increase in the

Company appeal (AT) No.371 and 417 of 2017 4

authorised and paid up capital. It is, therefore, directed

that the shareholding of the petitioner in the respondent

company stands restored to 50%. The allotments of the

increased shares are set aside. The Respondents are

directed to strike off the names of the new members and

return the share allotment money. They shall also rectify

their register of members and the returns filed with the

ROC.

(2) Declare the removal of the petitioner as a Director as

illegal, a decision taken by the unauthorised Board. His

position as a Director stands restored to Status ante the

alleged EGM dated 11th December, 2014.

15. All the aforesaid acts perpetuated on the Petitioner were to

his detriment and are undoubtedly oppressive to him, including

blocking him from operating the company's Bank accounts and

not granting his access to the company's statutory records and

financial statements. During the course of the proceedings, the

respondents were directed to furnish fortnightly statement of

accounts to be petitioner. The respondents have flouted the same.

16. Given the situation where there is a complete deadlock

between the 2 Directors, it would be expedient to direct the

petitioner or Respondent No.2 seek an exit on a higher valuation

proposed by either side. This Petition stands disposed in terms

of the above. No order as to costs."

Company appeal (AT) No.371 and 417 of 2017 5

2. The appellants in Company Appeal (AT) No.371 of 2017 has sought the

following relief:

a) set aside the impugned order of the Hon'ble National Company

Law Tribunal, New Delhi dated 13.09.2017 in CP No.5(ND)/2015

(Company Petition filed before the erstwhile Hon'ble Company Law

Board.

The appellant in Company Appeal (AT) No.417 of 2017 has sought the

following relief:

a) set aside the finding pertaining to the Appellant indulging in

parallel business as well as the finding pertaining to the

siphoning of funds not being proved against the Respondents

in the Judgement dated 13.09.2017;

b) ad interim order in terms of prayer above.

3. We are firstly dealing with the Company Appeal (AT) No.371 of 2017

unless specifically stated in respect of Company Appeal (AT) No.417/2017.

The brief facts of the case are that the Brands Academy Private Ltd

(hereinafter referred to as a "Company") registered under the Companies Act,

1956. The authorised, issued and paid up share capital of the company is

Rs.1,00,000/-. Shri Rishu Monga and Shri Sanjay Kumar are two directors of

the company and are holding 5000 shares each of Rs.10/- per share. The

company is involved in the planning and execution and conceptualization of

events in India and abroad in the field of academic training. The company has

only the above two directors. As per appellant, Mr. Ajay Kumar, Respondent

Company appeal (AT) No.371 and 417 of 2017 6

No.2 has been appointed as Additional Director by passing a Board Resolution

on 11.12.2014. It is stated that the company was running smoothly and

making profit as well and the appellants decided to take action against the

respondent No.1 and his brother and the shares of appellant No.2 were split.

Appellant filed a CS (OS) No.7 of 2015 against the respondent No.1 and his

brother, their company and firm who apart from other anti-company activities

were conducting an event "Global Quality Awards" in the name of M/s Brands

Impact Private Ltd with a view to promote their own business interest at the

cost, expense and by using company data-base and resources. Appellant No.1

permitted the appellant No.2 to allot his shares as desired in favour of the

Respondent No.2 and Mr. Puneet Sachdeva. Notice under section 167 of Act

was served by hand to the Respondent No.1 but he refused to accept the same.

The appellants issued notice of EGM scheduled for 27.1.2015 to the

respondent No.1 by speed post and mail. The respondent No.1 did not reply

to the notice rather he threatened the company with dire consequences and

as the subsequent events would unfold actually lived up to the threat by

entangling the company in several cases including the Board of Directors in

to criminal cases. The brothers were busy in diverting business and promoting

their own and family concerns at the cost of business, reputation, goodwill

and market standing of the appellant No.1 and an ensuing event was so

promoted that it was to be used as launching pad for the brother of the

Respondent No.1. The appellants filed civil suit before the Delhi High Court

against Respondent No.1 and his brother alongwith their entities not to be

associated with the event. The appellants and respondent filed contempt

cases for non-compliances of the order passed in the civil suit by the High

Company appeal (AT) No.371 and 417 of 2017 7

Court including the direction for de-freezing the account of the appellant,

however, the contempt petitions were disposed of leaving the parties at liberty

to follow up the remedy in execution. None of the parties have approached

the High Court for execution, however, the attempts by the appellant to

operate the account was opposed by the Respondent No.1 in collusion with

ICICI Bank, though the appellant No.1 is in in dire need of funds. Respondent

No.2 got his brother to file a civil suit against the company questioning his

dismissal and seeking other relief. The respondent No.1 and his brother has

set up rival business and companies in their own name and also the

firms/entities set up by their family members are acting in tandem with each

other leaving nothing to chance by hiring the same counsels for their cases

and also for issuing specific notices against the company events and also

obtain order to facilitate the business of their entities and blocking the

businesses of the appellant company. It is stated that the Tribunal neither

takes note of the conduct of the respondent on record prior and post petition

or notices the admitted documents and company records or the settled legal

principles, the proceedings and materials as placed before it but simply

decided everything illegal since it has decided to believe the case of the

Respondent No.1 and not to deal with the facts, materials placed and

arguments advance by the appellant on record. Therefore, being aggrieved of

the said impugned order of the Tribunal, the appellant has filed the present

appeal

4. Reply has been filed on behalf of the Respondent No.1 stating that the

appeal is wholly misconceived and based on misrepresentation and

Company appeal (AT) No.371 and 417 of 2017 8

concealment of facts. It has been stated that the judgement of the Learned

NCLT is in accordance with law and has been delivered after taking into

account the pleadings and the documentary evidence filed by the parties. The

Respondent has stated that the appeal has been filed and attested on

22.9.2017 and there are pleadings in the appeal with respect to event on

25.09.2017 which cannot be possible if indeed the appeal had been prepared

and filed on 22.9.2017.

5. Respondent No.1 further submitted that the present appeal is a

malafide attempt by the appellants to circumvent and avoid compliance of the

directions of the Tribunal in its judgement dated 13.9.2017. It is next stated

that the appellant had submitted before the Tribunal that they are following

the due process of law and would comply with the statutory filing which has

not been done till date. It is further stated that the appellant No.2 is in the

process of shifting the business of the appellant No.1 company and

appropriating its goodwill and brand value to his other entities with the

malafide intention of leaving the company bankrupt and in financial shambles

so as to defeat the benefits of reliefs granted to the Respondent No.1.

6. Respondent No.1 has stated that the due to hard work and labour of

the respondent no.1 the business of the company was progressing and it is

wrong that the business of the company progressed due to hard work of

appellant No.2. Respondent No.1 has denied that despite the alleged proxy

business entities launched and promoted by it and his brother in any manner

wrecked or affected the business, revenue and profitability of the company. It

is stated that it is Respondent No.1 and his ideas and hard work that brought

Company appeal (AT) No.371 and 417 of 2017 9

and established the goodwill and brand name of the company after which the

appellant No.2 with malafide intentions illegally, unceremoniously and

without following the due process of law, removed the Respondent No.1 as

director and further illegally diluted the shareholding of the Respondent No.1.

It is next submitted that Respondent No.1 at no point of time launched any

entities which were not in the knowledge of the appellant No.2 and the

appellant No.2 himself had launched independent entities which were

conducting the same business as that of the company and is still conducting

the same business using the goodwill and brand name of the company. It is

further stated that the Respondent No.1 and his brother were not bent upon

to wreck the business of the appellant No.1 as alleged and it is wrong that

the respondent No.1 was diverting funds of the company. Respondent No.1

has denied that the event Global Quality Awards was being held under the

name of Brands Impact or that it was without the knowledge of the appellants

as alleged.

7. Respondent No.1 has further denied that his brother or the employees

of the company were indulging in fraudulent activities prejudice to the

business interest of the company and it is wrong that the Respondent No.1

was patron and partner with the said employees in their alleged anti company

activities. It is denied by the respondent No.1 that he had instigated the ex-

employees to launch litigation against the company who were illegally

terminated. It is reiterated that the Respondent No.1 had filed company

petition against the oppression and mismanagement of the appellant No.2 in

the appellant No.1 and his illegal conduct of appointing the Respondent No.2

Company appeal (AT) No.371 and 417 of 2017 10

as an Additional Director and illegal removal of Respondent No.1 as director

of the company. It is reiterated that till such time as the Respondent No.1 was

the director in the company, the company had been regular in filing its

statements of affairs with the Registrar of Companies as required under the

law.

8. It is stated that malafide conduct of the appellants is evident from the

fact that they are attempting to insinuate and allege judicial misconduct on

the part of the Respondent No.1 so as to cover their own wrongs and non-

compliance of orders of erstwhile Company Law Board. It is argued that the

cases has been filed to assert the rights of the Respondent No.1 in the

company and to save the company from the malafide and illegal intentions of

the Appellant No.2 to divert and misappropriate the brand name and goodwill

of the company.

9. It is next argued that the Tribunal was justified in holding that the

transfer of shares of the Company was not as per law and the proper

procedure as laid down in the Articles of Association was not followed. It is

stated that no resolution with respect to the transfer of shares was filed on

record before the Tribunal and that the appellant No.2 has concocted pre-

dated documents to show the alleged transfer of shares and filed them

alongwith the appeal. The appellant No.2 never disclosed the dilution of the

shareholding of the Respondent No.1 but he only disclosed the same when

the appellant No.2 filed the detailed reply to the company petition. The

Respondent No.1, on coming to know about the dilution of shareholding,

immediately filed application under Section 6 & 9 of the Companies Act, 1956

Company appeal (AT) No.371 and 417 of 2017 11

seeking details of the said alleged transfer. In its reply the appellant No.2

disclosed that 2% shares had been transferred to one Mr. Puneet Sachdev

and the Respondent No.3 but did not file any documents to prove the alleged

transfer of shares. It clearly shows that the alleged transfer of shares was

illegal. It is stated that no offer letter was sent to the Respondent No.1.

However, the offer letter was also sent to Respondent No.2 and one Mr. Puneet

Sachdeva who were not the existing shareholders of the company as on the

date of the resolutions made in the EGM held on 27.1.2015. It is argued that

the shares could only be offered to other individuals only after the existing

shareholders had been offered the additional shares and the same had been

denied by them. Therefore, the Tribunal was rightly justified in passing the

order setting aside the decisions of the EGM dated 27.1.2015. There is no

illegality or perversity in the orders of the Tribunal.

10. It is next argued that the non-supplying of the financial statement to

the Respondent No.1 is clear evidence and indication of the oppression and

mismanagement of the affairs of the company as well as the malafide intention

of appellant No.2 to keep the Respondent No.1 out of the affairs of the

company.

11. It is next stated that the Tribunal has rightly come to the finding that

there is a deadlock in running and managing the affairs of the company in as

much as there is no way in which the appellant No.2 and the Respondent

No.1 can work together for the betterment of the company. The judgement of

the Tribunal has been passed in accordance with law and after taking into

account the pleadings and the documentary evidence filed by the parties.

Company appeal (AT) No.371 and 417 of 2017 12

12. Written submissions has been filed by the appellant No.2 and the

Respondent No.1. Both the parties has reiterated their stand as submitted

by them in appeal and in reply.

13. Company Appeal (AT) No.417 of 2017 has been filed by the appellant

against the very same impugned order dated 13.9.2017 passed in CP

No.5(ND)/2015. The appellant in this appeal has prayed to set aside the

findings pertaining to the appellant indulging in parallel business as well as

the finding pertaining to the siphoning of funds not being proved against the

respondent in the judgement dated 13.9.2017. The appellant has filed the

appellant to that extent only. No reply has been filed by the Respondents in

this appeal. Learned counsel for the parties argued both the appeals.

13. We have heard the parties and perused the entire record in both the

appeals.

14. The first issue raised by the appellant is that the Tribunal has erred in

questioning and then setting aside the proposal to enhance capital in the

legitimate exercise of its powers for the company business. The respondent

No.1 has stated that no notice of convening EGM on 11.12.2014 was sent to

him. The appellant No.2 has not produced any proof before the Tribunal that

the notice was sent to Respondent No.1. That no proof has been produced

even before this Appellate Tribunal to substantiate his version. The appellant

No.2 and the Respondent No.1 being the only two directors of the company,

no decision could have been taken without the consent of the respondent

No.1. The decision to increase in the authorised and paid up capital was

taken on the said EGM. Since no proof was produced by the appellant No.2

Company appeal (AT) No.371 and 417 of 2017 13

for inviting Respondent No.1 for the said meeting; Respondent No.1 being the

director/shareholder of the company did not attend the meeting, therefore,

without the presence of Respondent No.1, the quorum cannot be said to have

been constituted nor any valid resolution passed.

15. The next issue raised by the appellant is that the shares were

transferred to other members in accordance with the procedure as laid down

in the Articles of Association and relevant provisions of law and the Tribunal

has held this transfer as illegal. The Respondent No.1 has argued that the

appellant No.2 has never denied the contention that the appellant No.2 and

the Respondent No.1 were the only 50% shareholders of the company. It is

stated that the shares were transferred to Respondent No.3 and Mr. Pawan

Sachdeva without first being offered to the Respondent No.1. The appellant

No.2 submits that letter of offer was made to the Respondent No.1 but he

failed to apply for the increase in the shares and, therefore, the unsubscribed

shares were allotted to others. The Respondent No.1 submits that the letter

of offer was never served on him and the entire exercise of issuing a letter was

a farce. The appellant No.2 have failed to place the copy of the letter sent to

Respondent No.1 and the postal receipt also does not record the full address

of the Respondent No.1. Respondent No.1 submits as no notice was received,

the question of exercising his option for allotment never arose.

16. Since we have already held that without the consent/presence of the

Respondent No.1 the quorum cannot be said to have been constituted nor any

valid resolution passed; further no notice was received by the Respondent

Company appeal (AT) No.371 and 417 of 2017 14

No.1 for exercising the option, therefore, we hold that the shares were

transferred to other members in an illegal manner.

17. The next issue raised by the appellant No.2 is that the Respondent No.1

is doing the parallel businesses through their own related parties and

siphoning money of the company. The similar allegation has been levelled by

the Respondent No.1 against the appellant. On hearing both the parties what

appears is that both the parties are doing their parallel business. On record,

a number of cases and counter cases have been filed in the various courts

listed below:

S.No. Case No. Title Status 1 C.S(OS) No.07 M/s Brands Academy Disposed of on of 2015 Pvt Ltd Vs Sh Rishu 09.01.2015 Monga & Ors 2 Contempt M/s Brands Academy Disposed of on Petition No.451 Pvt Ltd Vs Rishu Monga 11.12.2015 of 2015 in CS & Ors No.07 of 2015 3 Cont. Case (c) Rishu Monga Vs Pending No.616 of 2015 Brands Academy & Ors 4 CS(OS) Amol Monga Vs Brands Pending No.2204/2015 Academy & Ors 5 Company Rishu Monga Vs Pending Appeal No.26 of Brands Academy & Ors 2015 6 CP No.5(ND)/15 Rishu Monga Vs Pending Brands Academy & Ors 7 CP Rishu Monga Vs Big Pending No.79(ND)/15 Brand Research & Ors 8 Cont Case Rishu Monga & Ors Vs Disposed off vide No.522 of 2015 Sanjay Kumar & Ors order dated 11.12.2015 9 Labour Amol Monga & Brands Pending Commissioner/ Academy Pvt Ltd Labour Court

Company appeal (AT) No.371 and 417 of 2017 15

18. In view of the large number of cases filed against each other, therefore,

we are of the opinion that it would not be possible for both the parties to work

together for running the company in a smooth manner and it would be in the

interest of both the directors/members as well as the company that one of

them may seek an exit from the company.

19. In view of our above discussions, we do not find any cogent reasons to

interfere in the impugned order. Both the appeals are dismissed. The

impugned order dated 13.09.2017 passed by the National Company Law

Tribunal, New Delhi Bench at New Delhi in CP No.5(ND)/2015 is upheld. No

order as to cost.

(Justice A.I.S. Cheema) (Mr. Balvinder Singh) Member (Judicial) Member (Technical)

New Delhi

Dated:19-3-2018

BM

Company appeal (AT) No.371 and 417 of 2017 16

Company appeal (AT) No.371 and 417 of 2017